593 #
© 2014 Pearson Canada Inc.#
Suppose the Bank of Canada releases a policy statement today which leads people to believe
that the Bank will be enacting expansionary monetary policy in the near future. Everything else
held constant, the release of this statement would immediately cause the demand for Canadian
assets to ____ and the Canadian dollar to ____.
A) increase; appreciate
B) decrease; appreciate
C) increase; depreciate
D) decrease; depreciate
Answer: D
Diff: 3 Type: MC Page Ref: 480 - 481
Skill: Applied
Objective List: 19.4 Understand the factors that change the exchange rate
Suppose a report was released today that showed the Euro-Zone inflation rate is running
above the European Central Bank's inflation rate target. This leads people to expect that the
European Central Bank will enact contractionary policy in the near future. Everything else held
constant, the release of this report would immediately cause the demand for Canadian assets to
____ and the Canadian dollar will ____.
A) increase; appreciate
B) increase; depreciate
C) decrease; appreciate
D) decrease; depreciate
Answer: D
Diff: 3 Type: MC Page Ref: 480 - 481
Skill: Applied
Objective List: 19.4 Understand the factors that change the exchange rate
Suppose that the latest Consumer Price Index (CPI) release shows a higher inflation rate in
the Canadian than was expected. Everything else held constant, the release of the CPI report
would immediately cause the demand for Canadian assets to ____ and the Canadian dollar
would ____.
A) increase; appreciate
B) increase; depreciate
C) decrease; appreciate
D) decrease; depreciate
Answer: A
Diff: 1 Type: MC Page Ref: 480 - 481
Skill: Applied
Objective List: 19.4 Understand the factors that change the exchange rate